Earnings: take this out, leave this in. Earnings expectations for the second half are lower but still holding up in the mid-single digits, but there continues to be a wide dispersion from the winners to the losers. There's big growth continuing in energy, some growth in consumer discretionary and industrials, and earnings are notably lower for communication services (Meta is a big problem) and Financials (JPMorgan Chase, Wells Fargo will likely report lower earnings). Ann Larson at Bernstein noted that you can get a very different outlook on earnings if you include or exclude certain sectors. S & P 500 earnings: Q3 estimates S & P 500: up 4.7% Ex-energy: down 2.2% Ex-financials: up 8.3% Source: Bernstein Bottom line: Overall estimates for Q3 were in the 8% range a month ago, and is now in the roughly 5% range. That is down, but not out, and certainly not indicative of a recession, Nick Raich at The Earnings Scout noted. "EPS growth will decelerate but it is never anticipated to go negative. How can there be a real recession when corporate earnings growth never goes negative," he said in a note to clients. With the overall market now trading at a relatively pricey 18+ times forward earnings, Raich noted that stocks are now pricing in a near-perfect environment. "As stocks have rallied, we have grown increasingly concerned that the market is too optimistic the Fed will be able to engineer a soft economic landing as it battles inflation," he said. The problem: The market's normal relationship with earnings has reversed. Rising earnings are normally associated with a rising market, and vice-versa. However, at the beginning of the year, stocks fell as EPS estimates rose. Now, stocks are rising as EPS estimates fall. "This confuses many people leaving them to conclude earnings do not matter. However, they would be wrong," Raich said, noting that the markets are betting the worst of the EPS estimate cuts will soon be over.